Commodification is the transformation of goods and services, as well as ideas or other entities that normally may not be considered goods,[1] into a commodity (in the Marxist sense of the word).

The Marxist understanding of commodity is distinct from the meaning of commodity in mainstream business theory. One way to summarize the difference is that commoditization is about proprietary things becoming generic, whereas commodification is about unsalable things becoming salable.

Commodity played a key role throughout Marx's work, he considered it a cell-form of capitalism and a key starting point for an analysis of this politico-economic system.[2]

Commodification is often criticised on the grounds that some things ought not to be for sale and ought not to be treated as if they were a tradeable commodity--for example education, data, knowledge in the digital age. [6]

The word commodification, which describes assignment of economic value to something not previously considered in economic terms, is sometimes also used to describe the transformation of the market for a unique, branded product into a market based on undifferentiated products.[citation needed]

These two concepts are fundamentally different and the business community more commonly uses commoditization to describe the transformation of the market to undifferentiated products through increased competition, typically resulting in decreasing prices. While in economic terms, commoditization is closely related to and often follows from the stage when a market changes from one of monopolistic competition to one of perfect competition, a product essentially becomes a commodity when customers perceive little or no value difference between brands or versions.

Commoditization can be the desired outcome of an entity in the market, or it can be an unintentional outcome that no party actively sought to achieve. (For example, see Xerox#Trademark.)

Consumers can benefit from commoditization, since perfect competition usually leads to lower prices. Branded producers often suffer under commoditization, since the value of the brand (and ability to command price premiums) can be weakened.[citation needed]

However, false commoditization can create substantial risk when premier products do have substantial value to offer, particularly in health, safety and security. Examples are counterfeit drugs and generic network services (loss of 911).[citation needed]

The difference between the terms of commodification (Marxist political theory) and commoditization (business theory) was highlighted by Douglas Rushkoff.[7] Rushkoff argued that the words commodification and commoditization were used to describe the two different processes of the assignment of value to a social good, and the movement towards undifferentiated competition, respectively:

Commodification (1975, origins Marxist political theory) is used to describe the process by which something which does not have an economic value is assigned a value and hence how market values can replace other social values. It describes a modification of relationships, formerly untainted by commerce, into commercial relationships in everyday use.

Commoditization (early 1990s in business theory) is the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic to perfect competition.

Rushkoff's distinction is only partly true, because in anthropology, the two terms are used interchangeably to describe the process of making commodities out of anything that did not used to be available for trade previously. [8][9]

American author and feminist bell hooks (Gloria Jean Watkins) refers to cultural commodification as "eating the other". By this she means that cultural expressions, revolutionary or post modern, can be sold to the dominant culture.[10] Any messages of social change are not marketed for their messages but used as a mechanism to acquire a piece of the "primitive". Any interests in past historical culture almost always have a modern twist. According to Mariana Torgovnick:

What is clear now is that the West's fascination with the primitive has to do with its own crises in identity, with its own need to clearly demarcate subject and object even while flirting with other ways of experiencing the universe.[11]

Hooks states that marginalized groups are seduced by this concept because of "the promise of recognition and reconciliation".

When the dominant culture demands that the Other be offered as sign that progressive political change is taking place, that the American Dream can indeed be inclusive of difference, it invites a resurgence of essentialist cultural nationalism.

Socialist movements are losing their voices on change because members of the "movement" are not promoting the message but participating in a fashion statement. Activists' hard works are marketable to the masses without accountability. An example of commodification is the colors red, black, and green, which are the colors of the African Liberation Army (ALA). For people of African descent these colors represent red (the innocent bloodshed of Africans), black (African people) and green (stolen land of Africa). These colors are marketed worldwide on all types of apparel and shoes. The colors do not carry the message of the resistance any longer; they are now merely a fashion statement.

Given this cultural context, Black Nationalism is more a gesture of powerlessness than a sign of critical resistance. Who can take seriously Public Enemy's insistence that the dominated and their allies 'fight the power' when that declaration is in no way linked to the collective organized struggle. When young black people mouth 1960s' black nationalist rhetoric, don Kente cloth, gold medallions, dread their hair, and diss the white folks they hang out with, they expose the way meaningless commodification strips these signs of political integrity and meaning, denying the possibility that they can serve as a catalyst for concrete political action. As signs, their power to ignite critical consciousness is diffused when they are commodified. Communities of resistance are replaced by communities of consumption.

^This includes money itself, human beings, and the natural environment, which are not goods or services, let alone commodities. See Karl Polanyi, "The Self-Regulating Market", page 40 in Economics as a Social Science, 2nd edn, 2004.